Regulatory updates - Bahrain

Bahrain is not the only country in the GCC that has expressed interest in adopting e-invoicing and CTC (continuous transaction controls) to achieve certain goals, such as having tax data available in a standard and accurate format, increasing transparency, facilitating the audit process, and reducing the shadow economy.

Meanwhile, we are awaiting the full technical specifications to be released by the NBR in due course. However, it is anticipated that the envisioned e-invoicing model will be similar to KSA. Namely, taxpayers will be required to issue true electronic invoices and, at a later stage, clear and validate them with a mandatory infrastructure.

No specific dates regarding the e-invoicing implementation timeframe have been stipulated yet. It is expected that the roll-out will be in a phased-out approach which may take place in the upcoming two years.

This is a very important milestone for Bahrain’s regulatory tax landscape and a game changer for Bahrainian businesses. Pagero is closely monitoring the developments in the country - stay tuned.

Currently, the National Bureau for Revenue in Bahrain (NBR) requires taxpayers that log into the NBR platform to complete a short digital study survey about invoicing. This questionnaire is thought to assess the taxpayers’ readiness for the case of e-invoicing mechanism implementation in the country.

The survey, which can be completed in Arabic or English, focuses on the number of invoices generated annually per VAT number and whether a taxpayer is issuing invoices electronically. If the taxpayer answers yes to issuing e-invoices, they are asked to state the name of their service provider.

Although the Kingdom’s tax authority gathers taxpayers’ input on e-invoicing, no official statements have been made yet. Pagero is following the developments in Bahrain and will inform our customers about the changes in due time.

The Kingdom of Bahrain started applying the value-added tax regime on 1 January 2019 at the basic rate of 5% on all goods and services, except for some zero-rated goods and services (e.g., education sector and medical care services) and VAT-exempt goods, such as dairies, fruits and vegetables.

On Monday, the Council of Ministers in Bahrain announced in their Cabinet session statement the amendment to the value-added tax percentage increase from 5% to 10 %, starting from 1 January 2022. The government’s aim with this procedure is to balance better its expenditures and revenues, which were affected by the COVID-19 pandemic in the last couple of years.

Bahrain is not the first country in the GCC that took the initiative to increase the standard VAT rate. Saudi Arabia has also raised its VAT rate from 5% to 15% earlier in July 2020. However, KSA may revert to the lower VAT rate depending on the Kingdom’s achievement of its economic objectives, as we reported in our previous update.

Will the UAE follow its neighbour countries? Pagero is closely monitoring the developments in the Middle East!